Market Confusion!

This week the soybean market is fulfilling one of Murphy’s Laws: “The market will do whatever is necessary to fool the majority.” According to a report by Agriculture.com, cash soybean bids broke above the $1.00 rally level on October 29. Strength at that time led many to believe there were large gains still ahead. Since then, action has leveled off, and prices have become much less volatile. Bets that prices could go straight up were tempered by two days, November 4 and November 19, when they broke below the dollar level. Both times there was a quick rebound back above that “magic“ level.

Scanning the charts of cash bids and March futures gives the impression that the high was on October 31 with the price of $9.69. However, the ability of the market to rebound every time the support level is broken makes me think that the bids could hold in this area or higher for a long time.

In addition to chart action that is somewhat bullish is the fact that basis has finally started to improve. I admit that the move is small and not consistent across all price levels. It is at least better than having the basis deteriorate as the record soybean crop finally comes to town. Hope that the end of the year will see much better basis and gradually improving cash bids.

Meanwhile, corn bids continue to plug along, pennies up and pennies down. The net result has been a gradually improving cash bid. That is better than having violent large moves up and down but not going anywhere. At least the price today is such that market analysts have stopped taking about cash corn prices below $3.00. With the size of the 2014 crop, it may take until spring for corn to be above production cost if indeed it ever gets there for most of us.

All cash bids quoted in this column are from Midwest Farmers Co-op in southeast Nebraska.

Yield Reports Are Coming in High

This year is looking great when it comes to yields.  They are coming in very high.  Compared to this point last year, we are coming 24% higher on corn and 30% higher on soybeans.

Keep in mind these are self reported yields.  In good years like 2009, yield reports ended up being 37 bushels per acre higher than the USDA.  And bad years like 2012, they were actually lower than the USDA.

With that in mind, take a look at these yield maps and charts and see for yourself.

Depressed Prices Ups Farmers Hedging

What do farmers need to keep in mind about the futures market?  Let Dave Leheman, CME Group Managing Director of Research and Product Development, tell you.  Here's a short video from an interview by Agriculture.com.

Corn & Soybean Crops Continue Historic March

U.S. corn and soybean producers are again on pace to set a new high in yields according to USDA's Aug. 12th Crop Production report.  Last years corn crop was a new record, and soybeans were the third highest ever.

Corn

Corn production is projected at 14 billion bushels, based on conditions as of Aug. 1st.  Yields are expected to average 167.4 bushels per acre, up 8.6 bushels from 2013.  If this turns out to be correct it'll be the highest yield recorded in the United States.  

Market analyst Brain Basting, Advanced Trading, said in a recent interview with Delta Farm Press that the corn production numbers "were a little below the average trade guess of 14.25 billion bushels.  It's a start, a mark on the wall.  Historically, there have been significant changes over time relative to the August report."

USDA's estimated ending stocks for corn, at 1.8 billion bushels, was also well below the average trade guess of 2.03 billion bushels, according to Basting.  "The key thing now is to see if we have some more export demand surface at these lower prices."

Soybeans

Soybean production is forcasted at a record 3.82 billion bushels, up 16 percent from last year.  Based on Aug. 1st conditions, yields should average 45.4 bushels per acre, up 2.1 from last year.  Area for harvest in the United States is expected to be 84.1 million acres, up 11 percent from last year.

Soybean carryout is expected to be 430 million bushels "which is exactly triple the estimate for 2013-14, at 140 million bushels," Basting said.  "That is a burdensome carryout.  The trade is going to be watching the weather the last three weeks of August.  The southwestern Midwest did get some good rains recently which helped those double-cropped soybeans there.  The soybean market is looking at what could be the largest soybean crop ever."

Two New Varieties of Winter Wheat

Wheat growers in the Central US have learned about new Winter Wheat that will hit the market in 2015.

In a recent story by Agriculture.com, Syngenta announced the launch of SY Clearstone CL2 for Montana and Western North Dakota.  Also, Kansas State University's KanMark will be marketed to Kansas and the surrounding states.

"SY Clearstone CL2 is an ideal option for planting this fall because it excelled in a broad range of yield trials in this area and combines excellent yield potential with the agronomics growers have been looking for," said Corey Dathe, Northern Plains cereals key account lead, Syngenta.  "As certified seed, it provides growers with added assurance for consistent performance and high quality."

A hard red variety, it is a taller, semi dwarf variety with good test weight and can stand up to harsh winters.  It has high protein content with a two-gene herbicide tolerance.  It gives growers better weed management options while still offering a high yield.

KanMark is more suited for the central Plains.

It is from Kansas State's wheat breeding team.  It features reliable yield potential even under low precipitation ideal conditions, according to wheat breeder Allen Fitz.

It's targeted primarily for western Kansas but can also be used in central Kansas, Oklahoma, Nebraska, Texas, and eastern Colorado.

Fitz warns it is moderately susceptible to acidic soils and scab, so farmers would have to take necessary precautions.

KanMark boasts resistance to stripe rust, leaf rust, and soil-borne mosaic virus.  However, it is susceptible to Hessian fly and moderately susceptible to powdery mildew and tan spot.  It contains multi-gene resistance to leaf and stripe rust, and tends to yield towards the top of the yields chart.

KanMark is the product of a three way cross and was originally bred for resistance from leaf and stripe rust.  Its pedigree includes Parula, Pastor and Karl 92.  Fitz added that this is a very short-statured, upright variety and that producers may not see much of a canopy.  But he warns not to judge it until it comes across the scale.

"I always thought this was an ugly duckling wheat," said Fitz.  "But we're not here to release bouquet wheat, we're here to release varieties that will make money for producers, and I think it will do that."

KanMark is named to honor Mark Carleton, who was a wheat researcher at Kansas State.  He brought back varieties from Russia and used them to breed Kanred nearly a century ago.  Carleton was also the first president of American Society of Agronomy.  His contributions to the American wheat industry were substantial.

Corn Looking to Rebound

After having a rough May and June grain futures are trying to rebound on the heels of last Friday's modest gains.  Heavy rain in the Northwest of the Corn Belt could end up doing more harm than good.  However, Kansas City futures show strength that could trigger a short covering rally.  Otherwise, the saying of "rain makes grain" is being put to the test.

Farm Futures Senior Editor Bryce Knorr talks about the market with Robert Hahn, Valley News Live TV, Fargo.

To hear the interview click here and scroll down to the bottom of the article to find the audio link.

Pesticide Looneys and Conspiracy Theorist

Recently, Delta Farm Press wrote an article debunking many myths surrounding pesticides and GMO crops.  Of course they were ready for some responses from the community on this subject.  To see some of the responses click here.

Now think a little about what was said.  The only logical conclusion is that these people haven't done their research.  Instead of getting their facts and thinking about it logically, they responded with emotion.  Let's take a look at some of these responses and clear some things up.

One person wrote, "China, who purchases a large quantity of corn, has refused to purchase this year because of its GMO status.  Now farmers who have these crops are (affected) because they can't sell them.  The current battle now is should these seed companies be held liable because farmers can't sell them.  It all goes back to pesticides.  Research GMO and the companies that make them.  Your point of view is misinformed.  Do some research."

According to the USDA, which anyone can look up, overall US corn exports has increased by 300 million bushels since the beginning of the year.  And farmers don't trade their products with foreign nations.  Traders do that.

Then their's this.  "It would seem that ignoring the scientific evidence of the impact to humans from endocrine disrupting ag chemicals, that ignoring the scientific research showing the impact on humans from the cancers and immune diseases these and other ag chemicals cause and even ignoring the yield data, showing NO yield increases and in most cases LOWER yields from GMO crops you, the Penton Press Group continue to further the agenda of corporate chemical America.  It is sad ... and criminal.  But congratulations are in order:  you are now fully, legally, accomplices to their crime."

There is no evidence that if you use crop protection products properly that any of what this reader brings up would happen.  Also, to suggest standard practices in farming is somehow illegal is beyond the pale.

What would happen if we band GMO's and pesticides?  Sit back and think before reacting to that question.  Farmers work with a horribly tight deadline to feed the world.  To sustain humanity day upon day, year after year, decade after decade.  They have to deal with changing and unpredictable weather and now growing radicalism and regulation.

What would happen?  Millions would starve to death and global wars would break out.  What sounds more criminal to you?

Interested in an Ag Job?

For years the Ag industry has lacked young workers.  Well, AgCareers.com is looking to fix that.  The agricultural industry is growing.  And as long as grain and livestock prices remain high, and there is no reason to believe that will change anytime soon, the industry will continue to grow.  With all this growth the Ag industry is beginning to hire.

Two years ago, the International Agri-Center launched a program to hire returning military veterans.  It's called the Ag Warriors program.  This program was designed to help soldiers, sailors, marines, airmen, and coast guard with employers in the ag business who needed experienced workers.

In the video below the CEO of AgCareers.com Eric Spell talks about the program and how it will be beneficial for both employers in the Ag industry and returning vets.  Just click on the link to see the video.

CEO Eric Spell

What To Do With Uninsured Crops

The non-insured crop disaster assistance program (NAP) is a federally funded program that helps producers reduce their risk when growing foods and fiber crops, specialty crops and crops for livestock feed.  These benefits are only available for crops for which the catastrophic level of crop insurance is not available.  Application for coverage must be filed by the applicable crops application closing date.

Production levels for all crops must be reported to the FSA no later than the acreage reporting date for the crop the following year.  FSA requires any production reported in a loss year be verifiable according to Agency specifications.  NAP losses must be reported within 15 days of the loss became apparent.

All applications for NAP payment must be signed by the subsequent crop year's acreage reporting date in order to be considered timely.  There are no late file provisions for NAP applications for payment.

Contact your local FSA County Office for more information on the NAP program and for NAP application closing dates for specific crops.

Treat Your Soybean Seeds

Don't think of seed treatment as an input cost.  Think of it as an investment.  It's really only a small investment you have to make to ensure your beans are taken care of.  For example, it takes less than a bushel of soybeans to pay for the treatment.

Wet soils that are poorly drained promotes the development of fungal and cause seedling diseases, which slows germination and plant growth.  You will waste less seeds, see more stands, resulting in a better yield and eventually a increase on your return of investment.

While there are many different seed treatment products out there, I highly suggest using Latham Hi-Tech Seeds signature Soy Shield Plus, which has fungicide and insecticide.  It protects seeds from disease and insect damage for around 30 days.  This time frame is longer than most other seed treatments and usually covers the window needed for seedlings to grow.

Soy Shield Plus has a fungicide combination that protects against soil born diseases.  Diseases such as Pythium, Phytophthora, Fusarium and Rhizoctonia.  It also provides health benefits that for increased germination.

Some seed treatments that could protect nematodes, which are becoming more prevalent.  Many fully loaded treatments contain innoculants, micronutrients or plant foods.  For more info go to Latham Hi-Tech Seeds website.

Closing Grain Futures

Just real quick I thought you would be interested in the closing grain futures from March 17th, 2014.

• May corn closed at $4.79, down 7 cents
• May soybeans closed at $13.91 and 3/4, up 3 and 1/4 cents.
• May soybean meal closed at $446.60, up $2.60.
• May soybean oil closed at $41.89, down 40 points.
• May wheat closed at $6.74 and 1/2, down 12 and 3/4 cents.
• April crude oil closed at $98.08, down 81 cents.
• May cotton closed at $92.03, down 16 points.
• April gold closed at $1,372.90, down $6.10.
• Dow Jones Industrial Average: 16,247.22, up 181.55 points.

Climate Changes Impact on Agriculture

Irregardless of what's causing climate change it is in fact changing.  Those in the agriculture industry that don't adjust to this are bound to be left behind.  What are the major things in climate change taking place and what can you do about it?  According to agriculture.com, in a interview with climatologist Mark Seeley from the University of Minnesota here are a few things to look for.

General Temps Are Rising.

What does this mean?  

• Changes in depth and duration of soil and lake freeze
• More rapid breakdown in residue
• Later fall nitrogen applications
• Change in survival rates of pests, parasites, plant pathogens and soil microbes
• Change in plant hardiness zones
• Longer growing seasons

Higher Frequency of dewpoints of 70 degrees or Higher

• Seasonal dynamics of pathogens, parasites, insects and microorganism populations
• Increased workload in heat-related healthcare
• Increased stress on livestock

Changes in Precipitation Quantity and Character

• Mitigation of erosion
• Altered irrigation, tile damage, runoff, etc
• Impact on insurance
• Change in sewer runoff design
• Amplified flow means mitigation of flooding potential

What Can You Do?

First off don't ignore it.  Irregardless of what you believe is causing it, it is happening.  Climate change should be impacting what you're doing.  Don't get bogged down in worrying about what's happening globally.  Pay attention to what's happening in your area.  Take those changes into account and make the appropriate changes.

What did Seeley predict in this years planting season?  According to agriculture.com he's predicting a cool and wet season.  However, pay attention to your region.  Just because it's cool and wet in say Georgia, doesn't mean it won't be warm and dry in Wyoming.

For more information on Seeley's report click on the link below.

Climate & Weather Education

Farmland Values Cooling Off

It's upon us!  That long stretch of a dramatic rise in land values is finally slowing down.  According to the Federal Reserve Bank of Kansas City land in Nebraska, Kansas, Wyoming, Montana, Colorado, Oklahoma and Western Missouri have all cooled off.  This could trigger what I believe is a farmland gold rush for buyers. 

How's That? 

Many farmers have been holding on to their land in hopes to selling it at it's highest value well beyond the normal age a farmer does.  Well, those values have peaked, leveled out and are now starting to come back down a bit.  As of now, there are fewer farms for sale on the market.  I expect a dramatic increase here quickly with farms selling at a dramatic pace.  So if you're an investor looking to get in, now is an excellent time to be brushing up and learning about the cropland business.

Where Should I Go?

There are many websites you can go to to learn.  My favorite is Brownfield Ag News.  This is where you can keep up with all things agricultural.  I especially like it has a spot where the commodity prices are constantly up to date.  You can also download and app for your smart phone as well.

Another good place is Farmers National Company.  Here is a one stop shop for all things agricultural and they do an excellent job spelling things out in laymen's terms to better help you understand.  Also, they are the largest farm management company in the United States.  So, find a local manager in your area using there site and sit down and talk with him.  That the best way to learn.

And then finally, talk to a local real estate agent to help you look and make decisions.  Farmers National Company also does this.  Depending on where you're looking I highly suggest Farmers National Kansas City.  If anything, they can help point you in the right direction.

What About a Bubble?

This is a common fear people have.  While it is a possibility it's highly unlikely.  Most farms were bought by cash buyers.  It was rare someone bought a farm with loaned money.  The reason is farmland prices always go up and rarely fall back.  Now we are experiencing a slow down and may experience a lowering in price, but that won't be the trend for long.  As a matter of fact, what will most likely happen is instead of farm prices rising at a clip of 25% per year.  They are more likely to rise at 5% per year.  So there won't be any collapse like the housing market which was primarily driven by debt.

If you wish to read the complete survey by the Federal Reserve Bank of Kansas City just click on the link below.

Fed Reserve of KC Survey

Ownership and Estate Planning

Trusts

There are two kinds of trusts that are commonly seen in the farmland industry.  There is the revocable or family trust and there's the irrevocable trust.

The revocable or family trust is were usually you or a family member is the trustee.

A irrevocable trust usually involves a corporate trustee.  I will go into different kinds of corporate trusts you can set up and what is best for you in future posts.

Types of Property Ownership

Tenancy in Common

Tenancy in common is another commonly seen type of farmland ownership we see.  Tenancy in common is where a property is held by two or more persons with only the unity of possession.  There may hold a varying size of interest in the property.  The owners may take the title at different times.  The owners may also have different deeds.

Possible Issues

The owners will share an undivided possession.  So upon the death of one owner there is no right of survivorship.  The other owner can't take the passed owners shares unless stated so in a will.  Decedent's interest passes to his or her will.  Or, it passes to the state law of distribution.

Types of Property Ownership

Most Common is Joint Tenancy

The number one form of land ownership we see is called joint tenancy.  Joint tenancy is where all co-owners are equal.  There is a right to survivorship which means one of the co-owners passes away his or her share would then be passed on to the remaining co-owners.  This is common with married couples.  This does not go through probate when one owner dies.  And it does not pass according to a will.

Possible Issues

When the co-owners both die the descendant's ownership disappears.  It passes free of unsecured creditors.  There can be a problem if there are marriage difficulties or there are children for a previous marriage.  Also, it will not be included in the descendant's estate, therefore it cannot have an exemption made against it.

Fitting Future Farm Owners Into Your Plans

Succession Planning

This question almost always comes up at some point when people talk about buying farmland.  How do I make sure this is passed on to my children or grandchildren properly.  There are many different ways but they all fall under the umbrella of succession planning.  

Succession planning is a continuous process to transfer knowledge, skills, management, control and ownership between generations.

Decisions Affecting Succession Planning

There are three main things that affect succession planning.  First is ownership.  How is that defined or going to be defined.  The second is what type of business entity is it going to be.  Is it a corporation, a LLC etc.  Finally you have to think about estate planning.  Is it part of your retirement?  How will it affect you tax planning?

How To Get Started On Succession Planning

You want to know your basis and how your property is owned.  Depending on that is how you would get started.  I will go over the different forms of ownership in the next handful of posts.

Crop Exports

USDA has reported that corn exports have come in much higher than expected.  Soybeans remained about the same and wheat came in below expectations.

Wheat came in about 10 million bushels lower than last week.  However, with how good wheat came in the week before so I wouldn't worry too much about these numbers.

Corn is up over 8 million higher than the week before of around 19 million.  Right now the total is almost double what is what last year.

Soybeans came about 2 million less than a week ago.  But it's up almost 9 million than the year before.

While this had varied from week to week, what we've been seeing is a very strong year in crop production.  None of this is a shock but is much welcomed news after the last couple years.  And with what appears to be a good wet winter we may be looking at another strong year in crop production.

Wheat Exports

Wheat needed a little help to meet what the USDA estimated it would make.  That help came from abroad.  According to Brownfield Ag News for America Egypt bought 60,000 tons of US soft red winter out of 300,000 tons.  Japan bought 29,000 tons of US dark northern spring and 20,800 tons of US hard red winter wheat.  South Korea's Nonghyup Feed Inc. bought 65,000 tons of optional origin feed wheat and Jordan purchased 50,000 tons of optional origin wheat.

Also, according to Reuters, Strategie Grains lowered its 2014 European Union soft wheat production estimate to 137.7 million tons.  Up 2% from 2013, but down from the 138 million tons estimated in December stemming from concerns about the crops in Great Britain and Bulgaria.

Fundamental Puzzle Pieces In The Market

What Are The Fundamental Players In The Commodity Market?

There are three things to think about when look at the commodity prices when it comes to farmland.  US supply, US demand and the US economy.

US Supply

This is production and potential production.  Both have an affect on the market.

US Demand

A good example of this is ethanol.  That has become a very popular source of fuel recently and has really driven then corn demand in this country.

US Economy

As long as the U.S. dollar is strong so will the marketplace for US crops abroad.

Corn is the Market Leader!

With the strong push for ethanol corn has exploded on the US market recently.  It should continue to do so for the foreseeable future.

Weather Will Always Trump!

With all these things that go into what affects commodities, nothing affects it more than the weather.  Keep an eye on the forecasts in the area of your farm.  If you truly want to know what the future of commodity prices are just look to the sky.